Federal reserve interest rate: The Federal Reserve, often referred to as the Fed, is the central bank of the United States. One of the key tools the Fed uses to manage the economy is through its control over interest rates. These rates influence borrowing costs for individuals, businesses, and the government.
When the economy is growing too quickly and inflation is rising, the Fed may decide to raise interest rates. This can make borrowing more expensive, which can help to cool off the economy and reduce inflationary pressures.
Conversely, when the economy is slowing down or in recession, the Fed may lower interest rates to stimulate borrowing and spending, which can help to boost economic activity.
The Fed’s decisions on interest rates can have a significant impact on the overall economy. Higher interest rates can make it more expensive for businesses to borrow money for expansion, which can lead to slower economic growth.
On the other hand, lower interest rates can make it easier for businesses and individuals to borrow, which can help to stimulate economic activity.
Overall, the Federal Reserve plays a crucial role in managing the economy through its control over interest rates. By adjusting these rates, the Fed can help to promote stable economic growth and keep inflation in check.